This is reference to our discussion at our office on last week, from which, we understand that you would like us to advise on establishment of 100% Foreign Invested Company (hereinafter referred to as “FIC’) which is owned by foreign company (herein after referred to as “Client”) in Vietnam.
We further understand that you are now considering two options:
(i) FIC shall directly manufacture household furniture for domestic and international consumption, and
(ii) FIC shall OEM with other companies in Vietnam and sell products in Vietnam and abroad. We are therefore grateful to present you hereinafter our Legal Services Proposal for your review and consideration.
1. OUR PRELIMINARY COMMENTS
1.1. BRIEF INTRODUCTION ON SETTING UP FOREIGN INVESTED COMPANY IN VIETNAM
The establishment of a FIC in Vietnam requires an Investment Certificate from the licensing authority. Depending upon the location of the company, the licensing authority may be the Provincial People’s Committee (for companies located outside industrial or export processing zones) or the provincial Industrial and Export Processing Zones Management Authority (for companies located in industrial or export processing zones).
We would like to clarify that the procedure for establishment of a FIC in Vietnam generally takes a rather long time in comparison with other countries in the region. Our practical experiences show that although the total time for establishment of a foreign invested company as stipulated under Vietnam Investment Law 2014 is only 15 days, the actual process may take a longer time due to that the competent authority must consult other relevant offices to evaluate the investment project.
With respect to several cases that involves with relocation of 10,000 people or more in highlands; 20,000 people or more in other areas or requirement for changes of land purposes or project in several special field such as Construction and operation of airports; air transport; Construction and operation of national seaports; Petroleum exploration, extraction, and refinery etc, it shall require for approval from the National Assembly, Prime Minister or Provincial People Committee before starting the licensing process. In this case, we assume that your case is not subject to such requirement for approval. However, we reserve our right to re-quote our professional fee and amend the work schedule if your case is subject to approval of the National Assembly, Prime Minister or the Provincial People Committee.
In order to setup a FIC, it shall require you to undergo two following steps:
Step 1: Obtainment of Investment Certificate. The Law requires that within 15 working days from submission of the application dossier the competent authority shall have to issue the Investment Certificate for Foreign Investor. However, having preliminarily discussed withthe Licensing Authority, we do not much expect that the licensing authority can comply with this requirement in practice, especially, those relating to conditional investment sectors For granting the Investment Certificate, the relevant licensing authorities shall evaluate the legitimacy and the feasibility of such Investment Project to determine on granting of the Investment Certificate on the following basis:
· the legal framework including Vietnam’s WTO Commitments, Vietnam Investment Law, Vietnam Enterprise Law, Regulations applicable to specific industries as well as the master economic development plan of the city or province that the FIC shall register its head-office.
- Your financial ability, investment capital to put in the Investment Project, facilities and human resources serving the implementation of such investment project in Vietnam.
Step 2: After obtainment of Investment Certificate, Client shall be required to obtain the Certificate of Business Registration. The Law requires that within 05 working days from submission of application dossier, the competent authority shall have to issue the Certificate of Business Registration for forming the Foreign Invested Company.
1.2. SPECIFIC COMMENTS
For your ease of reference, please find hereinafter our analysis for each option:
Option 1: For this option, the very first work you have to conduct is to look for and lease a sufficient land lot for setting up the factory in Vietnam. For this purpose, you can directly lease a land lot from competent authority or lease a land lot in Industrial Zones from Industrial Zones Infrastructure Facilities Development Companies. In comparison with leasing land lot from competent authorities, leasing land lot in Industrial Zone shall be much more convenient as it does not take Client time for clearance of land lot and the procedure for leasing is also simpler1.
After entering into an In-principal Agreement or MOU on leasing land lot, Client can initiate the Licensing Process for obtainment of Investment Certificate. For obtainment of Investment Certificate in this case, Client need to propose a detailed feasibility study on business operation of the FIC after establishment, including, estimated investment capital in long term, estimated cost for manufacturing each products, technology labourers, water resource (if any), electricity etc used for manufacturing products and environment impact (if any) of the factory. Client must also prove that it has enough financialability to secure the stable operation of the FIC. This option should be adopted if Client can make sure about Market for consumption of products as well as source of raw material and qualified labourers in Vietnam. According to our practical experience, this option shall be much favoured by competent authority. If Client select to setup FIC in Industrial Zone, the licensing process can be very convenient.
Option 2: For this option, Client does not need to lease a land lot before initiating the licensing process. Client can just only lease an office for registration of the head office of FIC. An In-Principal Contract or MOU on Office Lease shall be required upon submission of application dossier for Investment Certificate. We also would like to note that, goods trading and export right is considered as conditional investment sector under Vietnam Law. Then, the Licensing process for obtaining Investment Certificate in this case may last in 02 months from submission of application dossier as it takes the Licensing Authorities time to consult relevant ministries before granting the Investment Certificate. This option should be adopted if Client is under the progress of tailoring to Vietnam Markets;
For two above options, in order to secure the high success possibility, we highly recommend Client to carefully account following factors: – Location: In Vietnam, location of a FIC is very important. Location of the FIC must be strictly compliant with master plan of the Competent Authority. In several provinces such as Vung Tau, Hung Yen, Binh Duong etc, the Lessor is required to get in principal approval before leasing its factory, office or land lot to foreign investor for manufacturing or registration of FIC Head Office. – Investment Capital of FIC:
Under Vietnam Law, both of options do not require for minimum rate of investment capital. Client shall be responsible for estimate of required investment capital for operating the FIC.
Investment Capital in Option 1 shall very much depend on proposed scale of the factory and location of the factory.
Meanwhile, Investment Capital in Option 2 shall depend on number of HS Code of goods to be traded by FIC.
According to our practical experience in the previous case, for the Option 2, investment capital should be at least 500,000USD.
– Experience of Client: Experience of Client in the field is also one of important factor that determining the success possibility of the case. Foreign Investor having no experience in the field is generally not favoured by the Licensing Authority.
2. Licensing Process:
The roadmap for the incorporation of the FIC can be described in following steps as follows:
a. Preparing the application dossier: We shall collect necessary information and documents from you. Upon receipt of necessary information and documents from you, we shall translate documents from English into Vietnamese and prepare the application dossier under the standard forms. The initial drafted application dossier shall be sent to you for your comments. Then, after updating the application dossier based on your comments, we shall obtain the preliminary comments from the competent authority and send the finalized application dossiers for you to sign and seal. We anticipate that this phase shall be completed within 10 working days.
b. Licensing Procedure: 02 working days from receipt of documents duly signed and sealed from Client, we shall submit the application dossier for starting the licensing procedure. – It shall take about 20 working days from submission of application dossier to the competent authority to obtain the Investment Certificate for Option 1 and about 2 months from submission of application dossier to the competent authority to obtain the Investment Certificate for Option 1.
– Within 02 working days from obtainment of Investment Certificate, we shall submit the application dossier for obtainment of Certificate of Business Registration. It shall take about 05 working days from submission of application dossier to the competent authority to obtain the Certificate of Business Registration.
c. Post licensing: Within 15 working days we shall complete the post licensing procedures such as publishing the FIC in News Paper, obtaining seal etc.
d. For avoidance of any doubt, in practice, the administrative procedure can be longer due to that the competent authority must consult relevant ministries before granting License. In such case, SB Law shall try its best to accelerate the progress in order to obtain the approval at the soonest.
